Suppose that for consumers A and B trading goods 1 and 2 in a general equilibrium...

Suppose that for consumers A and B trading goods 1 and 2 in a general equilibrium framework

uaxa,1,xa,2=xa,1∙xa,2 and ubxb,1,xb,2=xb,1+2xb,2

The initial endowments are given by ωa=(2,2) and ωb=(3,2) . Depict graphically the Edgeworth box including

Its dimensions
The location of the initial endowment
Each consumer’s indifference curves.

Note that in part (c), I just looking for you to depict the general shape of these indifference curves; you do not have to plot them out using the mathematical functions.

Expert Solution

An Edgeworth box helps us study the resource distribution between two individuals and determine efficient trading patterns to achieve maximum utility.

For the above case we see:

Total endowment of good X1= 2+3 = 5

Total endowment of good X2= 2+2 = 4

(a) Plotting good 1 on horizontal axis and good 2 on vertical axis, dimensions will be 5 units and 4 units respectively.

(b) Initial endowment is shown on point (2,2) and (3,2) for A and B respectively.

(c) The shapes of Indifference curves will be convex for A and downward sloping straight line for B. This is because utility function for A denotes a normal choice of goods between 1 and 2. Utility function for B is that if substitute goods.

See image.

Kindly note that as demanded, the shapes have been depicted without mathematical plotting. Thanks!

Rahul Sunny answered 6 months ago

Suppose there are two consumers, A and B, and two goods, X and Y. The consumers...

Suppose there are two consumers, A and B, and two goods, X and Y. The consumers have the following initial endowments and utility functions: W X A = 2 W Y A = 9 U A ( X , Y ) = X 1 3 Y 2 3 W X B = 6 W Y B = 2 U B ( X , Y ) = 3 X + 4 Y Suppose the price of X is PX=2 and the...

Suppose there are 2 consumers, A and B. The utility functions ofeach consumer are given...

Suppose there are 2 consumers, A and B. The utility functions of each consumer are given by: UA(X, Y ) = X^1/2 Y^1/2 UB(X, Y ) = 3X + 2Y The initial endowments are: WXA = 10, WYA = 10, WXB = 6, WYB = 6a) (20 points) Using an Edgeworth Box, graph the initial allocation (label it W) and draw the indifference curve for each consumer that runs through the initial allocation. Be sure to label your graph carefully...

1. Who are winners of a move to free trades? A) Consumers of exported goods B)...

1. Who are winners of a move to free trades? A) Consumers of exported goods B) Producers of exported goods C) Producers of imported goods D) None of the above answers 2. The short-run shutdown condition occurs for a firm in the short-run when A) Price per unit good is equal to average variable cost per unit good B) Price per unit good is greater than average variable cost per unit good C) Price per unit good is less than...

1. Outline the main options for trading between businesses and consumers. 2. Explain the concepts of...

1. Outline the main options for trading between businesses and consumers. 2. Explain the concepts of disintermediation and re-intermediation with reference to a particular industry; what are the implications for a company operating in this industry? 3. Describe the three main alternative locations for trading within the electronic marketplace. 4. What are the main types of commercial transactions that can occur through the Internet or in traditional commerce?

Equilibrium in the loanable funds and goods markets: Suppose that the economy begins in equilibrium in...

Equilibrium in the loanable funds and goods markets: Suppose that the economy begins in equilibrium in the loanable funds and goods market. Then, the government decides to reduce its purchases without changing taxes. According to the Classical model: a) How do the supply and demand for loanable funds in the loanable funds market shift? Draw a diagram to show what happens to interest rates and investment in the new equilibrium. b) How do the supply and demand for goods in...

2. (a) State the necessary and sufficient conditions for consumer equilibrium. (b) Choose two goods and...

2. (a) State the necessary and sufficient conditions for consumer equilibrium. (b) Choose two goods and their corresponding prices, such that the consumer is in disequilibrium, i.e., he or she gets more marginal utility from one good than from the other given the goods prices. Indicate how the consumer will change her spending habits to return to equilibrium. (c) What role does the laws/principle of diminishing marginal utility play in the process you described above? (d) Characterize as best as...

Equilibrium in the loanable funds and goods markets, pt. 2: Again, suppose that the economy begins...

Equilibrium in the loanable funds and goods markets, pt. 2: Again, suppose that the economy begins in equilibrium in the loanable funds and goods market. Now suppose that businesses become more pessimistic about the economy and decide that they want to invest less at every real interest rate r. According to the Classical model: a) How do the supply and demand for loanable funds in the loanable funds market shift? Draw a diagram to show what happens to interest rates...

1- A is Trading and Tourism Company. 2- B is the owner of a Building A...

1- A is Trading and Tourism Company. 2- B is the owner of a Building A interred with B in to an investment Contract where A will take the building as investment which is owned by B and will turn to Hotel. It was agreed that, A prior to invest will take the approval from B on the plans and drawings. A sent the plans and the drawing to B for his approval. It was agreed that within a week...

Suppose the output or goods market is in equilibrium and the level of taxes in that...

Suppose the output or goods market is in equilibrium and the level of taxes in that country is increased. How does this affect the output market? Explain your answer through the sequence of change(s) on any variable(s) involved.

1. Assume a society in which consumers partake of only two goods, bread (B) and wine...

1. Assume a society in which consumers partake of only two goods, bread (B) and wine (W). The price of bread is 4 units per loaf and the price of wine is 2 units per glass. Mr. H, a typical consumer with whom we shall be concerned, has a weekly income of 200 units; the government taxes away entirely any part of that income which he does not spend. There is also a rationing scheme whereby each consumer, Mr. H....

Question